The scheme was contested in the first tier tribunal by the HMRC, which argued that it was illegal. But, Rangers protested their innocence, saying that payments were loans that could be repaid and thus, were not taxable. The tribunal sided with Rangers.
Voting against the CVA proposed by Rangers FC in 2012, HMRC dumped the club’s operational company into liquidation in June of the same year. This allowed for authorities to subject the footballing giant to intense scrutiny of its financial affairs over the past twenty years, and of its directors and backroom officials.
HMRC to vote on an Appeal
HMRC now has a month to decide whether it will launch an appeal to the Inner House of the Court of Session. A spokesman for the governmental taxation department said:
“The company, Rangers Football Club Plc, did not go into liquidation because of this tax case. It is a matter of public record that Rangers was placed in administration by its principal shareholder and director because it was unable to pay its creditors, including HMRC.
“HMRC voted against the CVA proposed by the administration. ¬Liquidation allows a full investigation into the conduct of the owners and financial officers of the company, which would not be possible in a CVA.
“It wouldn’t be the case that HMRC would vote down a CVA based on ¬wanting directors’ conduct to be looked as a general rule, as happened with Rangers.”
On the Insolvency Service’s Investigations and Enforcement Directorate radar
The board of directors’ suspect conduct was already on the Insolvency Service’s Investigations and Enforcement Directorate radar up to three years prior to Rangers FC’s compulsory liquidation.
A spokesman for Murray International Holdings (MIH), the company behind Rangers FC in 2012, said:
“The decision substantially reduces HMRC’s claim in the liquidation of the old Rangers Football Club. While we have been successful in both the FTT and UTT, there are, as we have stated previously, no victors.
“This has been an exceptionally long, difficult and expensive process involving not just the FTT and UTT but also several approaches to resolve the with senior HMRC officials on a commercially sensible basis for all parties which were rejected.”
The dispute goes back to HMRC’s issuing of a winding up order to Rangers FC, when it became apparent that that club could not pay its tax obligations, which collectively amounted to roughly £14m. It was under the then management that Rangers began its use of EBTs.
Duff & Phelps were the practitioner company charged, in 2012, with negotiating a sale of club assets to an investment group led by Sheffield Utd chairman, Charles Green, for a cut-price of £5.5. Liquidators from BDO were assigned to Rangers old company, and are currently scouring the books to ascertain whether further repayments can be made to creditors and to settle any outstanding debts.
A Sham Process
Public outcry at controversy surrounding Rangers’ initial placement into liquidation has been far-reaching, with certain sectors believing the entire process was a sham.
The above source at MIH continues: “During proceedings, it would have been entirely inappropriate for us to highlight fundamental misunderstandings or contribute to this public debate.
“Notwithstanding all of this, it is abundantly clear that Rangers Football Club would not have gone into administration or liquidation had the purchaser fulfilled its contractual obligations and responsibilities.
“Similar to the resolution of the UTT appeal, we hope that the relevant authorities conclude their investigations and commence proceedings at the earliest opportunity.”